Retailers Buzz About Potential of Radio Tags in Supply Chain

Chicago

Affixing tags embedded with tiny chips and antennas onto bluejeans and shirts so the apparel can be tracked from distribution center to store shelves may sound futuristic.

But at last week's Retail Systems 2002 conference here, San Francisco-based Gap Inc. discussed the potential for radio frequency identification (RFID) technology to help retailers gain greater visibility into their supply chains. Gap conducted a three-month exploratory pilot project late last year.

"We wanted to see, is it a real thing or is it hype?" said Neco Can, director of Gap's project management office. "The technology works. It gives us unit-level visibility without seeing the unit. And if I know where my goods are, I can make much better decisions."

Unlike products stamped with bar codes, which must be read by devices within their line of sight, items equipped with RFID tags can be read even when they're sitting in corrugated crates.

Now that the tags are becoming cheaper, they're becoming a viable option for retailers to consider.

Among the big players, Wal-Mart Stores Inc. in Bentonville, Ark., has conducted field trials, and rival Target Corp. in Minneapolis is planning a pilot project this summer, possibly with frozen food, CIO Paul Singer said. Singer, whose presentation on RFID packed a sizable room at last week's retail conference, said his company's tests will be done in cooperation with MIT's 3-year-old Auto-ID Center.

The Auto-ID Center now has more than 50 global sponsor companies, including The Gillette Co., Procter & Gamble, The Coca-Cola Co., Johnson & Johnson, Pfizer Inc., Unilever, United Parcel Service Inc. and Wal-Mart. Its mission is to design, build, test and deploy the infrastructure necessary to make any unique object identifiable to any computer in the world.

The organization, in conjunction with the Uniform Code Council and EAN International, is working on the development of an electronic product code that can be built into an RFID tag and carry unique identifying information for any object, such as style, color, size and serial number.

Peter Abell, an analyst at AMR Research, said the tag's chip cost typically ranges from 20 cents to 75 cents, but some manufacturers predict a 5-cent chip, perhaps as soon as summer's end.

Some retailers said the cost would need to drop to 3 cents or even a penny before they would consider using the technology. But their interest is clearly starting to be piqued now that progress is being made.

Can said Gap's exploration of RFID technology was expensive, as any pilot project can be. Not only was the hardware more costly than it is now, but his firm also had to develop two custom applications to convert the RFID tag data to a format that can be used by other systems.

Can said he's now seeing off-the-shelf middleware from companies such as DataBrokers Inc. in Fairfield, Ohio. And at least one major consultancy, Accenture, is showing an increasing level of interest in helping retailers adopt RFID, he said. "This technology does what we want. The problem is, until there's more acceptance of RFID, the cost will not come down," he said.

Can noted that retailers who try RFID will find myriad potential benefits. Gap, for instance, gained an increase in data accuracy during its pilot, he said. Other potential benefits include prevention of theft and fraud, improved customer service, reduced instances of items going out of stock, speedier product delivery and even stores without checkout counters.

"In order to cost-justify a project like this, you have to look at it throughout the supply chain, because one single line item may not by itself justify the project. Just loss prevention or inventory management might not do it," Can said.

Copyright © 2002 IDG Communications, Inc.

7 inconvenient truths about the hybrid work trend
Shop Tech Products at Amazon